CST Brands, Inc. Reports First Quarter 2017 Results

First Quarter 2017 Net Income of $3 million, or $0.04 per diluted
share. Excluding certain merger-related items discussed below, Net
Income was $12 million or $0.15 per diluted share

Canadian Merchandise and Services Gross Profit increased 11% with
Same Store Merchandise and Services Sales Per Site Per Day
increasing 4% in the First Quarter 2017 when compared to First
Quarter 2016

U.S. Merchandise and Services Gross Profit increased 1% with
Operating Expenses declining 1% or $1 million in the First Quarter
2017 when compared to the same period in 2016

Opened a total of 13 New-to-Industry stores in the U.S. in the
First Quarter 2017

May 08, 2017 04:05 PM Eastern Time

SAN ANTONIO--(EON: Enhanced Online News)--CST Brands, Inc. (NYSE: CST), one of the largest independent retailers
of motor fuels and convenience merchandise in North America, today
reported financial results for the first quarter ended March 31, 2017.

Kim Lubel, Chairman and CEO of CST Brands, said, "As we anticipate
the completion of the merger with Circle K Stores, Inc., a wholly-owned
subsidiary of Alimentation Couche-Tard Inc., I am proud of what our team
has accomplished since becoming a public company four years ago. Since
2013, we have opened 165 new stores in the U.S. and Canada, made several
key acquisitions to further support our organic growth strategy, and
amplified our proprietary fresh food and private label choices inside
our stores. Above all, we grew shareholder value by increasing the stock
price of CST by 60% over our four years of operations, with the pending
merger with Circle K expected to close in the second quarter.”

First Quarter Results

For the three month period ended March 31, 2017, the Company reported
net income of $3 million, or $0.04 per diluted share compared to net
income of $19 million, or $0.24 per diluted share, for the same period
in 2016. The decline in net income was primarily attributable to a
decline in motor fuel gross profit in the U.S., which was partially
offset by an increase in merchandise and services gross profit in both
the U.S. and Canada and an increase in motor fuel gross profit in
Canada. Impacting net income for the first quarter of 2017 is
approximately $9 million, net of tax, of merger-related fees. For the
three month period ended March 31, 2016, included in net income are
acquisition expenses, legal expenses and professional fees of $3
million, net of tax, and a gain on the sale of assets of $1 million, net
of tax. Excluding these items, net income would have been approximately
$12 million, or $0.15 per diluted share, and $21 million, or $0.27 per
diluted share for the three month periods ended March 31, 2017 and 2016,
respectively (Non-GAAP measures, including EBITDA, Adjusted Net Income
and Adjusted Net Income Per Share, are described and are reconciled to
the corresponding GAAP measures in the Supplemental Disclosure section
of this release).

Motor fuel gross profit in the U.S. for the first quarter of 2017 was
$58 million versus $75 million in the same quarter of 2016. This
represented a decline of 23%, as the Company experienced weaker fuel
margins in the first quarter of 2017 when compared to the first quarter
of 2016. The decline in motor fuel gross profit was primarily
attributable to a decrease in motor fuel gross profit, on a per gallon
basis ("cents per gallon" or "CPG"), decreasing from 15.4 CPG in the
first quarter of 2016 to 12.1 CPG in the first quarter of 2017. This was
the result of higher wholesale motor fuel prices. The decline in fuel
margins was partially offset by a 1% increase in total motor fuel
gallons sold, resulting from the Company's expanded core network. This
volume increase was achieved despite the divestment of stores in
California and Wyoming that was completed during the third quarter 2016.
Core same store motor fuel sales, on a gallons per store per day basis,
declined 3% during the first quarter of 2017, primarily as a reflection
of softer demand due to economic conditions in certain areas where the
Company operates and a slight increase in the average retail price of
motor fuel per gallon compared to the same period of last year.

U.S. merchandise and services gross profit increased 1% when compared to
the first quarter of 2016, primarily driven by an overall increase in
merchandise and services sales and gross profits in the Company's U.S.
core and New-to-Industry (“NTI”) store sales, aided by acquisition and
organic growth. Core same store merchandise and services sales per store
per day declined 2% during the first quarter of 2017, due to a decrease
in customer count comparison, primarily early in the quarter when
compared to the high customer count created by a record setting lotto
jackpot in early 2016.

In Canada, the Company reported a strong quarter with total gross profit
of $94 million compared to $83 million for the first quarter of 2016,
representing an increase of 13%. Motor fuel gross profit increased $9
million or 20% when compared to the first quarter of 2016. The
improvement in motor fuel gross profit was driven by increases in motor
fuel gross margin across the Company's Canadian retail sites and in
volume at the company operated and Cardlock network, which the Company
believes is reflective of solid economic indicators in the Quebec and
Ontario markets. On a same-store basis, motor fuel gallons, on a per
site per day basis, increased 2% when compared to the first quarter of
2016.

Canadian merchandise and services gross profit increased $2 million or
11% when compared to the first quarter of 2016. The increase in
merchandise and services gross profit was driven by an increase in store
customer count as well as an increase in the network’s car wash
business. On a same-store basis, merchandise and services sales per site
per day increased 4% when compared to the first quarter of 2016.

Liquidity and Capital Resources

For the three months ended March 31, 2017, cash flow provided by
operating activities totaled $48 million. Cash flow used in investing
activities was $38 million, primarily related to capital expenditures.
Total capital expenditures, excluding acquisitions, for the three months
ended March 31, 2017 and 2016 were $40 million and $63 million,
respectively. Cash flow provided by financing activities was $30
million, including net proceeds on CST Brands' revolving credit facility
of $45 million and payments of $19 million on CST Brands' term loan.
Additionally, there was no effect of foreign currency translation to
cash. Overall, cash increased by $40 million. Cash, as of March 31,
2017, was $176 million.

As of May 4, 2017, approximately $89 million was available for future
borrowings under CST Brands' revolving credit facility.

Basis of Presentation

The CST Brands Statements of Income are presented on a consolidated
basis; however, the amounts presented account for CST’s investment in
CrossAmerica under the equity method of accounting. CrossAmerica is a
consolidated variable interest entity; however, management reviews the
results of operations of CrossAmerica under the equity method of
accounting because of CST’s 20.2% interest of CrossAmerica’s outstanding
units. Net income and earnings per share attributable to CST are
unchanged under the equity method of accounting from consolidating
CrossAmerica. CST’s operating segments on the following pages are
presented before intercompany eliminations with CrossAmerica. Therefore,
the U.S. Retail segment includes in cost of sales the wholesale fuel
costs for sites supplied by CrossAmerica and operating expenses include
rent from sites leased from CrossAmerica. Consolidated financial
statements that include CrossAmerica are provided in CST Brands’ March
31, 2017 Form 10-Q.

Withdrawal of Guidance and Conference Call

As previously reported, on August 21, 2016, CST Brands entered into an
Agreement and Plan of Merger with Circle K Stores Inc., a Texas
corporation (“Circle K”). Under the terms of the merger agreement, CST
will be merged with a subsidiary of Circle K. Circle K is a wholly owned
subsidiary of Alimentation Couche-Tard Inc. CST stockholders have
approved the merger agreement. The closing of the merger remains subject
to the receipt of regulatory approvals. CST and Couche-Tard have been
continuing to work cooperatively with regulators in their review of the
merger and, based on what CST considers to be the substantial progress
made to date, while there can be no assurances as to timing, CST
continues to expect that it will meet the previously stated goal of
completing the merger during the current CST calendar quarter (i.e. on
or before June 30, 2017).

In light of the pending merger, CST will not be issuing financial
guidance regarding the Company’s projected financial performance and
will not be hosting a first quarter earnings conference call.

The CST Brands, Inc. Statements of Income are presented on a
consolidated basis; however, the amounts presented in the table
above account for CST’s investment in CrossAmerica under the
equity method of accounting. CrossAmerica is a consolidated
variable interest entity; however, management reviews the results
of operations of CrossAmerica under the equity method of
accounting because of CST’s 20.2% interest of CrossAmerica’s
outstanding units. Net income and earnings per share attributable
to CST are unchanged under the equity method of accounting from
consolidating CrossAmerica. CST’s operating segments on the
following pages are presented before intercompany eliminations
with CrossAmerica. Therefore, the U.S. Retail segment includes in
cost of sales the wholesale fuel costs for sites supplied by
CrossAmerica and operating expenses include rent from sites leased
from CrossAmerica.

Segment Results

U.S. Retail

The following tables highlight the results of operations and certain
operating metrics of the Company’s U.S. Retail segment (millions of
dollars, except number of convenience stores, per site per day and per
gallon amounts):

Includes the results from car wash sales and commissions from
lottery, money orders, air/water/vacuum services, video and game
rentals and ATM fees.

(b)

Primarily consists of rental income.

(c)

Represents the portfolio of core retail stores and excludes recently
acquired retail stores that are being integrated or are under
performance evaluation to determine if they are: (a) to be fully
integrated into the existing core retail operations of CST, (b) to
be converted into a dealer operated site, or (c) other strategic
alternatives, including divestiture or longer term operation by
CrossAmerica. All NTIs are core stores and, accordingly, are
included in the core system operating statistics. For the period of
February 1 to March 31, 2016, Flash Foods stores were classified as
non-core. Effective April 1, 2016, the Flash Foods stores are
included in the U.S. Retail Segment’s core-store operations.
Accordingly, their operations are excluded from the core system
operating statistics for the first quarter of 2016.

The same-store information consists of aggregated individual store
results for all stores in operation substantially throughout both
periods presented. Stores that were temporarily closed for a brief
period of time during the periods being compared remain in the
same-store sales comparison. If a store is replaced, either at the
same location or relocated to a new location, it is removed from the
comparison until the new store has been in operation for
substantially all of the periods being compared. NTIs are included
in the core same-store metrics when they meet this criteria.

(g)

Includes 6 retail sites that do not sell motor fuel, which were
acquired in the Nice N Easy acquisition.

Canadian Retail

The following tables highlight the results of operations and certain
operating metrics of the Canadian Retail segment (millions of U.S.
dollars, except number of retail sites, per site per day and per gallon
amounts):

Includes the results from car wash sales, commissions from lottery
and ATM fees.

(b)

Primarily consists of our business and home energy operations.

(c)

Company operated retail sites sell motor fuel and merchandise. The
Company sells only motor fuel at commission agent and dealer sites.
We do not currently distinguish between core and non-core stores in
our Canadian Retail segment. All sites in our Canadian Retail
segment are core stores.

(d)

Conversions represent stores that have changed their classification
from commission sites to company-owned and operated or vice versa.
Changes in classification result when we either take over the
operations of commission sites or convert an existing company-owned
and operated store to commission sites.

(e)

All amounts presented are stated in Canadian dollars to remove the
impact of foreign exchange and all fuel information excludes amounts
related to cardlock operations.

(f)

The same-store and same-site information consists of aggregated
individual store results for all sites in operation substantially
throughout both periods presented. Stores that were temporarily
closed for a brief period of time during the periods being compared
remain in the same-store sales comparison. If a store is replaced,
either at the same location or relocated to a new location, it is
removed from the comparison until the new store has been in
operation for substantially all of the periods being compared. NTIs
are included in the same-store metrics when they meet this criteria.

Supplemental Disclosure Regarding Non-GAAP Financial Information

EBITDA is a non-U.S. GAAP financial measure that represents net income
before income taxes, interest expense and depreciation, amortization and
accretion expense. EBITDAR is a non-U.S. GAAP financial measure that
further adjusts EBITDA by excluding minimum rent expense. Adjusted net
income and adjusted earnings per share remove certain discrete items
from the U.S. GAAP calculation that did not occur during both periods
being compared. The Company believes that EBITDA, EBITDAR, adjusted net
income and adjusted earnings per share are useful to investors and
creditors in evaluating its operating performance because (a) they
facilitate management’s ability to measure the operating performance of
the Company's business on a consistent basis by excluding the impact of
items not directly resulting from its retail operations and certain
discrete items that did not occur in both periods being compared; and
(b) securities analysts and other interested parties use such
calculations as a measure of financial performance. EBITDA, EBITDAR,
adjusted net income and adjusted diluted earnings per share do not
purport to be alternatives to net income and diluted earnings per share
as a measure of operating performance or to cash flows from operating
activities as a measure of liquidity. EBITDA, EBITDAR, adjusted net
income and adjusted diluted earnings per share have limitations as
analytical tools and should not be considered in isolation or as a
substitute for analysis of the Company’s results of operations as
reported under U.S. GAAP.

The following table presents a reconciliation of CST’s net income to
EBITDA and EBITDAR for the three months ended March 31, 2017 and 2016
and adjusted net income and adjusted diluted earnings per common share
for the three months ended March 31, 2017 and 2016 (in millions except
per share data or as otherwise noted):

The CST Brands, Inc. Statements of Income are presented on a
consolidated basis; however, the amounts presented in the table
above account for CST’s investment in CrossAmerica under the equity
method of accounting. CrossAmerica is a consolidated variable
interest entity; however, management reviews the results of
operations of CrossAmerica under the equity method of accounting
because of CST’s 20.2% interest of CrossAmerica’s outstanding units.
Net income and earnings per share attributable to CST are unchanged
under the equity method of accounting from consolidating
CrossAmerica.

(b)

Minimum rent expense is defined in the CST Credit Facility as rent
expense accrued during the period in accordance with U.S. GAAP, less
contingent rentals.

About CST Brands, Inc.

CST Brands, Inc. (NYSE: CST), a Fortune 500 Company, is one of the
largest independent retailers of motor fuels and convenience merchandise
in North America. Based in San Antonio, Texas, CST employs over 14,000
Team Members at over 2,000 locations throughout the Southwestern United
States, Georgia, Florida, New York and Eastern Canada offering a broad
array of convenience merchandise, beverages, snacks and prepared fresh
food. In the U.S., Corner Stores, Nice N Easy Grocery Shoppes, and Flash
Foods stores proudly sell a broad offering of branded and unbranded fuel
and proprietary baked goods and fresh food, packaged private label
products, U Force energy and sport drinks, Freestyle soft drinks and
signature ICEE drinks. In Canada, CST is the exclusive provider of
Ultramar fuel and its Dépanneur du Coin and Corner Stores sell signature
Transit Café coffee, proprietary baked goods and fresh food and private
label packaged goods. CST also owns the general partner of CrossAmerica
Partners LP, a master limited partnership and wholesale distributor of
fuels, based in Allentown, Pennsylvania. For more information about CST,
please visit www.cstbrands.com.

Safe Harbor Statement

Statements made in this press release relating to future plans, events,
or financial condition or performance are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements can generally be identified by
the use of words such as "expect," "plan," "anticipate," "intend,"
"outlook," "guidance," "believes," "should," "target," "goal,"
"forecast," "will," "may" or words of similar meaning. Forward-looking
statements are likely to address matters such as the companies’
respective or combined anticipated sales, expenses, margins, tax rates,
capital expenditures, profits, cash flows, liquidity and debt levels, as
well as their pricing and merchandising strategies and their anticipated
impact and intentions with respect to the construction of new stores,
including additional quick service restaurants, and the remodeling and
addition of new equipment and products to existing stores. These
forward-looking statements are based on the companies’ current plans and
expectations and involve a number of risks and uncertainties that could
cause actual results and events to vary materially from the results and
events anticipated or implied by such forward-looking statements.

The following factors, among others, could cause actual results and
events to differ materially from those expressed or implied in the
forward-looking statements: (1) the occurrence of any event, change or
other circumstances that could give rise to the termination of the
merger agreement; (2) the inability to complete the transactions
contemplated by the merger agreement in a timely manner or at all,
including due to the failure to obtain the required stockholder approval
or failure to receive necessary governmental or regulatory approvals
required to complete the transactions contemplated by the merger
agreement; (3) the risk of not fully realizing expected synergies in the
timeframe expected or at all; (4) the risk that the proposed
transactions disrupt current plans and operations, increase operating
costs, result in management distraction and the potential difficulties
in maintaining relationships with customers, suppliers and other third
parties and employee retention as a result of the announcement and
consummation of such transactions; (5) the outcome of any legal
proceedings instituted against the companies following announcement of
the merger agreement and transactions contemplated therein; and (6) the
possibility that the companies may be adversely affected by other
economic, business, and/or competitive factors.

Any number of other factors could affect actual results and events,
including, without limitation; the ability to enhance operating
performance through in-store initiatives, store remodel programs and the
addition of new equipment and products to existing stores; fluctuations
in domestic and global petroleum and fuel markets; realizing expected
benefits from fuel supply agreements; changes in the competitive
landscape of the convenience store industry, including fuel stations and
other non-traditional retailers located in the companies’ markets; the
effect of national and regional economic conditions on the convenience
store industry and the companies’ markets; the global financial crisis
and uncertainty in global economic conditions; wholesale cost increases
of, and tax increases on, tobacco products; the effect of regional
weather conditions and climate change on customer traffic and spending;
legal, technological, political and scientific developments regarding
climate change; financial difficulties of suppliers, including the
companies’ principal suppliers of fuel and merchandise, and their
ability to continue to supply their stores; the companies’ financial
leverage and debt covenants; a disruption of IT systems or a failure to
protect sensitive customer, employee or vendor data; the actual
operating results of new or acquired stores; environmental risks
associated with selling petroleum products; governmental laws and
regulations, including those relating to the environment and the impact
of mandated health care laws; unanticipated legal and other expenses,
and other risk factors described in the company's Definitive Proxy
Statement, filed with the SEC on October 11, 2016, the Company's latest
Annual Report on Form 10-K, the Company's Quarterly Reports on Form 10-Q
and other reports and documents the Company files with the SEC. While
the Company may elect to update these forward-looking statements at some
point in the future, it specifically disclaims any obligation to do so.

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